The Federal Circuit’s high rate of reversal of district court claim constructions is well documented.1 The de novo standard of review applied by the Federal Circuit to all aspects of claim construction has played a large part in this outcome. However, in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., Case No. 13-854 (Jan. 20, 2015), the Supreme Court chipped away at this one-size-fits-all approach to appellate review of claim construction. While claim construction ultimately remains subject to de novo review (especially when the construction is based solely on intrinsic evidence), any underlying findings of fact (i.e., findings about what the extrinsic evidence shows) will be subject to the more deferential “clear error” standard of review.
The Court in Teva v. Sandoz questioned the proper interplay between Federal Rule of Civil Procedure 52(a)(6) and the Supreme Court’s opinion in Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996). Rule 52(a)(6) states that “[f]indings of fact . . . must not be set aside unless clearly erroneous.” In Markman, the Supreme Court held that claim construction is “exclusively” for “the court” to determine, even when the construction has “evidentiary underpinnings.” 517 U.S. at 372, 390.
The Federal Circuit reconciled these authorities by reading Markman to permit an exception to Rule 52(a)(6). Thus, the Federal Circuit applied de novo review to all aspects of claim construction, including a district court’s resolution of underlying factual disputes. This approach was favored by the Federal Circuit as it was easy to administer and attempted to bring uniformity to claim construction issues across the country.
In Teva v. Sandoz, the Supreme Court rejected the Federal Circuit’s reconciliation. Specifically, the Supreme Court ruled that Markman did not create a special exception to Rule 52(a)(6) for claim construction. De novo review still applies to determinations of law, such as “when the district court reviews only evidence intrinsic to the patent.” Teva v. Sandoz, No. 13-854, slip op. at 11-12. However, in cases where “subsidiary facts are in dispute” and where courts are called upon to “make subsidiary factual findings” to resolve them, those findings “must be reviewed for clear error on appeal.” Id. at 12.
The impact of this ruling is up for debate. The Supreme Court itself characterized its decision as a narrow one that will come into play only occasionally because “subsidiary factfinding is unlikely to loom large in the universe of litigated claim construction.” Id. at 10 (citation omitted). The Supreme Court’s prediction may prove to be right given the Federal Circuit’s preference for intrinsic evidence on claim construction (Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005)) and the Supreme Court’s explanation that issues related to such evidence are to be reviewed de novo. However, the ruling presents a number of practical implications not yet understood. For example, will district court judges strive to base their claim constructions on extrinsic evidence to avoid de novo review? Will this decision result in less uniformity because district courts will have more discretion to weigh factual issues related to claim construction? The full impact of the Supreme Court’s decision remains to be seen.
What is clear is that the recent trend of overturning the Federal Circuit continues as the Supreme Court seeks to bring patent cases in line with other civil litigation. With other petitions for certiorari on similar issues pending, we may hear more from the Supreme Court soon.